Generally speaking, after your housing, your car is your biggest financial investment and responsibility. Whether you’re using an old beater or have a brand new model fresh from the dealer, virtually everyone wants to make the most of their vehicle and keep it in reasonable shape for as long as possible Your vehicle is very important to your life. It gets you to work, shuttles the kids, gets you to your appointments and so much more. It is essential to keep the household running smoothly. But it is not something we regularly think about when we manage our household budget. It should be..
Many people budget in their known fixed expenses when it comes to their vehicle. Cost factors such as car payments, insurance, licensing/registration, even expected fuel cost. If you don’t, you should. These items, if not budgeted and kept in check, could mean driving a vehicle that is beyond your means and a detriment to your overall financial well being . Most experts say that overall vehicle cost of ownership should not exceed 20% of your monthly income. This includes the items previously listed as well as the unknown repairs over the life of the vehicle. The best way to help deter those unforeseen repairs is to perform the regularly scheduled maintenance that the manufacture and your mechanic recommends. If you have all the fluids in your vehicle changed at the recommended intervals the likelihood of having a major failure of the components they protect is reduced significantly.
Budgeting and planning for these repair expenses will make sure you have the funds available when repairs are needed, keeping your vehicle in optimum shape. The likelihood of delaying needed maintenance and repairs when you do not have the funds easily available are high and can put undue wear on your vehicle making it not last as long as you would like, or causing a larger repair to be needed later. It’s easier to put away a more manageable amount monthly than to try to come up with a larger sum all at once when the repair is needed
There is not a one size fits all vehicle maintenance and repair budget plan that works for everyone. You obviously cannot have the same budget plan for a Chevrolet Malibu compared to a BMW or Mercedes. There are some general rules that you have to follow.
1) Determine how long you plan on keeping the vehicle
It is up to you but you need to figure out if you are going to get a new car every certain number of years or are going to drive it until the value is no longer worth the repair. This will help you figure out your overall time line for a budget. If you get a new car every 5 years or so then more than likely you will always have a car loan payment to deal with.
2) Determine the average mileage you drive each year
This is a huge determining factor. If you drive 30,000 miles vs. 20,000 miles a year you will need to do more maintenance and repairs in a shorter period of time. If you only drive 10,000 miles a year and get a new car every 3 to 5 years then you should look in to the lease options that dealers have to offer.
3) Ask your repair facility
Almost all repair facilities have the recommended/factory scheduled maintenance guide for your vehicle. They can help you figure out if your driving habits fall under the normal or severe category. Have them estimate the cost of the scheduled maintenance over the next 100,000 miles or so. (General rule of thumb is that factory schedule maintenance just repeats the same plan ever 100,000/120,000 miles.) Also, have a discussion with them about the replacement frequency and estimated cost of normal wear items such as tires, belts, brakes etc. Finally ask them if they have seen any common failures with your make and model of vehicle and the cost of those repairs. From there it can be determined what your general overall maintenance and repair costs are going to be.
4) Do the math
Take that estimated repair and maintenance cost number per 100,000 miles and divide that by the mileage driven per year to determine your cost per year. Then divide that by 12 to determine your monthly cost that you need to budget/save. I always recommend putting car expenses in to a separate account to protect it from being inadvertently spent or other bills.
Estimated cost of maintenance and repair for each 100,000 miles $5000.00
Number of years to reach 100,000 miles (using 25k for this example) 4
Amount per year needed to saved $1250.00
Divide by 12 for monthly amount needed $104.17
A website to help you determine true cost of ownership of your vehicle https://www.edmunds.com/tco.html
As always, you can call or stop by and we will answer any questions and help you figure out your car care budget.